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Strategic positioning
A Business-level strategy is a strategy targeted to compete in a single industry or product
market using your core competencies
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To position itself relative to its rivals, the firm must decide either to perform activities
differently, or perform different activities to its rivals
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Porter (1985), in his generic strategies approach, explains the different strategies that a
firm can decide to pursue
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Generic strategies can help the
organization to cope with the five competitive forces in the industry and do better than
other organization in the industry
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Generally, firms pursue only one of the above generic
strategies but some firms make an effort to pursue more than one strategy at a time by
bringing out a differentiated product at low cost
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Michael Porter has described three general types of strategies that are commonly used
by businesses to achieve and maintain competitive advantage
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Strategic scope looks at the size and structure of the market you intend to target
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Cost leadership strategy:
This strategy emphasizes efficiency
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Maintaining this strategy requires a continuous search for cost reductions in all aspects
of the business
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This
usually involves the construction of efficient-scale facilities, rigorous pursuit of cost
reductions from experience, overhead control and cost minimization in areas like R & D,
service, sales force or advertising
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Without one or more of these advantages, the strategy can easily be mimicked by
competitors
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It provides
a margin of safety that reduces the dangers of price increases from suppliers and
bargaining from customers
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The cost leadership strategy may require
building market share via aggressive pricing
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This can be done through design or brand image (Rolls Royce automobiles),
technology (Polaroid cameras), customer service, or other attractive features
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The basic aim of differentiation is to create brand
loyalty
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This can
provide higher sales margins, and mitigate the power of buyers who lack acceptable
substitute products
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Examples of companies that have implemented a successful
differentiation strategy are Nike, Apple or Mercedes-Benz
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It is also called
niche strategy
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As a result, the firm achieves
either differentiation from better meeting the needs of the particular target, lower
costs in serving this target, or both
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As a focus
strategy it may be used to select targets that are less vulnerable to substitutes
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Porter suggests that firms with a high market share are often quite profitable, so as firms
with low market share
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This was sometimes referred to as the stuck in the middle problem
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Firms in the middle were less profitable because they did not have a generic strategy
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He often argued
against the simultaneous pursuit of low costs and differentiation strategies
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The idea
these strategies are mutually exclusive is based on two main arguments: On the one
hand, the achievement of a greater differentiation means higher costs
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Indeed, Dess
and Davis (1984), in their study of the US paint industry, also suggested that successful
firms either possessed a differentiation or cost leadership strategy but not both
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Miller and Friesen (1986) for example suggest that achieving a strong position in
differentiation may entail an increase in the demand and the market share of the firm,
which will allow it to exploit certain economies of scale
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As well as with a strong position in costs, the firm will be able to
invest its profits in marketing, service or product attributes, thus reinforcing its position
in differentiation
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Therefore, differing from authors like Hambrick's (1983) or Dess and Davis's
(1984) that reflected only one strategic competence (differentiation or cost leadership)
but never both

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